This paper focuses on the co-evolution of macro-micro systems of innovation in Japan's pharmaceutical and biotechnology industries. Whereas the transformation of innovation systems has mostly been examined either at the macro, nationalpolicy level or at the micro, firm-strategy level, we argue that it is the interaction of the macro and micro-level changes that affects the whole system of innovation most substantially. Recent trends in the co-evolution of Japan's pharmaceutical and biotechnology industries are illustrated with such concrete examples as translational research, clinical trials, drug price, and research tools, and implications for public policy are drawn.

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The International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) started from the beginning of 1990. The main purpose of the conference is to consolidate necessary documentations and its formats of new drug application to the regulatory agencies among US, EU and Japan. In 1998 E5 guideline was implemented to extrapolate foreign clinical data to new regions, allowing sponsors to avoid unnecessary clinical trials in new regions. At the same time, a new GCP guideline has implemented to assure quality of foreign clinical trial data. The two new guidelines open the door to conduct small studies, called "bridging studies," in new regions for the extrapolation and conduction of simultaneous global studies. The two types of studies can provide better drugs in a timely fashion.
Against the recent trend on the research and development strategies of new drugs, Japanese clinical trial situations are known as "Hollowing out of clinical trials". The phenomenon are due to high costs in conducting clinical trials, slow recruit of patients, and the extrapolation of foreign clinical trial data. This situation expels conduct of bridging studies in Japan and participation in simultaneous global studies. Comparing the situation in conducting clinical trials in Japan, Asia, Europe and the US, we can examine the issues in clinical trials, investigate and incorporate factors to successful bridging and simultaneous global studies. Finally we can consider future issues to cope with among sponsors, academia and regulatory bodies.

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The aim of this paper is to investigate new drug R&D in respect of R&D cost. It is said that new drug R&D are highly risky, requiring extensive time and huge costs. The comparative study on the opportunity cost of one approved drug, including the cost of abandoned projects and interests in developments between Japanese and Western pharmaceutical companies, could suggest some hints toward efficient development. According to DiMasi (2003) and Yamada (2002, revised), three-fourths of the opportunity cost for projects not achieved are paid to market and interests. Therefore, a reduction in development period, decrease in risk, and cutback in monetary expense can reduce the opportunity cost. On the other hand, in-house research departments might not be exposed to competition because there are not very many pharmaceutical bio-ventures in Japan and/or because Japanese pharmaceutical companies have preferred in-house research to introductions from pharmaceutical bio-ventures and universities at the early stage of R&D. For the sake of enhancing the activities of in-house research developments, it will be important to value domestic pharmaceutical bio-ventures.

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The number of drugs approved in Japan is very small, compared to the US and Europe, and therefore, Japan is in great need of haste for developing new drugs. However, due to various factors, a phenomenon called "Hollowing-out of Clinical trials" has emerged in Japan. In reality, the number of clinical trials has greatly decreased. In Asia, on the other hand, countries that have made rapid progress in new drug development have appeared; they have become stronger by actively participating in multinational clinical trials. Under such circumstances, we are concerned that Japan may be left behind in the wave of globalization of new drug development.
In order to improve such an environment for clinical trials, the Japanese authorities have been working on a program for "Promotion of Large-Scale Clinical Trial Network" under the "3-year Plan for Activation of Clinical Studies" announced in 2003. Now "Anti-cancer Drugs Combination Therapy Examining Committee" , "Study Council on the Use of Unapproved Drugs" , "Panel on Clinical Trials" and so forth have been formed in Japan, where discussions from various angles have been carried out. In order for the Japanese pharmaceutical industry to survive against international competition, it is necessary to enhance the infrastructure to the level of the US and Europe and fight back against the globalization of new drug development. Now is the time to make great efforts toward drastic improvements in clinical trial environments in Japan. We believe such efforts will lead to providing the people of Japan with the most advanced medical services.
We, as one of the members of the pharmaceutical industry in Japan, will do our best so that the pharmaceutical industry in Japan can have clear and concrete strategies to acquire greater international competitiveness in the near future through the concerned efforts of the regulatory authorities, the pharmaceutical industry, healthcare professionals, and the people of Japan. Furthermore, we would like to persistently strive to provide the people of Japan with up-to-date medical treatments.

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The review process of new drug application (NDA) in Japan has changed in appearance and moved gradually toward a system adopted in the US. In contrast to the emphasis on organizational and structural changes, the mechanism by which the reviewers and the regulatory agency as a whole make decisions responding to submitted NDAs has not drawn due attention historically. Japanese NDA decisionmaking is characterized by two local features. First, there is no consensus on the societal objective of NDA review. It is also unclear what kind of conditions (e.g., budgetary restriction in insurance, level of Japanese practitioners, preferences) should be taken into account in the context of new drug approval decisions. Second, it has not been recognized that decisions of new drug approval are inherently made under significant uncertainties. Although these features are conspicuous in Japan, they are universal concerns applicable to any review system. Transparency in NDA decision making could be achieved only when these features are fully recognized and considered in real world situations.

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In this paper genetic testing using patented genes and R&D using patented research tools are taken as typical examples to discuss intellectual property policy for genetic inventions. Considering these cases, it is discussed how we can make a genetic invention common, providing inventors with exclusive rights. To this purpose, four policy tools are investigated: application of antitrust law, compulsory licensing, legislative exclusion from rights and legislative restriction of rights. It is true that these policy tools contribute to balancing exclusivity and dissemination of technology, there are problems regarding lack of predictability of rights and consistency with international treaties. Therefore, it is expected that a policy to promote accessibility to patented inventions be made without setting limitations on the effects of existing patent rights.
As one example of such a policy, the establishment of an organization for distribution of patents, aimed at bundling plural patented inventions on a field of technology to make licensing of each invention easier, is considered. For example, the "research tool consortium" to bundle research tool patents for academic uses would contribute to make smooth use of patented inventions for academia.
According to the enquiry for life scientists, it is shown that a majority of scientists are seeking this kind of organization. In the case of personally owned inventions, it is shown that a majority of scientists like a scheme of reciprocity in which those who provide their own inventions free of charge can use the inventions owned by others free of charge. Considering those actual voices a concrete scheme of the "research tool consortium" is investigated.

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In this article, we examine what to be done to create the better circumstance for medicinal research and development in Japan from the point of view or patent system and intellectual property policy. Firstly, we give an overview of the patent system. Secondly, we propose some intellectual property policies while explaining some intellectual property issues concerning medicinal development. As for the intellectual property issues, extension of patent right term, research tool patent, and medicinal invention are mentioned. Regarding research tool patents, we propose arbitration system for the essential patents to research and development. And regarding medicinal inventions, with reference to the amendment of the Examination Guidelines on advanced medicinal methods such as optimization of dosing interval or given dose, we point out some problems on the Examination Guidelines.

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With the reform of Japan's drug pricing system, the following five principles must be applied. (1) The reform stimulates research and development of innovative drugs, contributing to improvement in patients' QOL and fostering new industries. (2) While the reform enhances the evaluation of innovative drugs in terms of their pricing, the reform improves the soundness of Japan's national health insurance system by cutting unnecessary expenditures. (3) Maintaining Japan's public health insurance system, the reform makes market mechanisms function well, fostering adequate price formulation. (4) Based on drugs' characteristics, proper NHI price calculation methods apply. (5) The reform constructs a comprehensible drug pricing system, reflecting the current market prices and making discretion a minimum.
Based on the principles above, the following proposals are made; an introduction of a limited free pricing system for innovative drugs and reduction of NHI expenditures of patent-expired drugs to the NHI payment level of equivalente generics.

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Technological progress in medicine is remarkable. However, advanced interventional and diagnostic technologies cannot improve health outcomes unless they are effectively applied. Efficacy of these technologies is examined by clinical trials, but it is not clear how much they actually contribute to better outcomes in day-to-day practice. This paper investigates the extent to which its efficacy is affected by factors specific to each hospital, by utilizing random coefficient models.
Medical literature demonstrates that using stents improves long-term outcomes such as revascularization, although its short-term outcomes are not different than those of plain PTCA. This paper shows that the efficacy of stenting differs significantly across hospitals. Some hospitals effectively utilize stents while others negate its efficacy by inappropriate applications. Also, the efficacy of rotational atherectomy and intravascular ultrasound is found to vary significantly across hospitals.
Our results show that what is of urgent importance is not the introduction itself of advanced technologies, but the establishment of systems which enable such technologies to effectively contribute to improvements in health outcomes.

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This paper examines how health care expenditures are distributed within the non-elderly population in Japan with emphasis on concentration and persistence and analyzes the determinants of the persistence of high medical expenditures. It is well known that a small fraction of the population accounts for the bulk of health care expenditures. Even within the same age group or income group, the distribution of spending is highly skewed. Unfortunately, not much empirical research has been conducted on the distribution of health care expenditures in Japan. Using nonelderly individual health insurance claim data from 111 health insurance societies, we perform descriptive and econometric analyses in order to examine the extent of concentration and its duration, and we also analyze the determinants thereof. We find that a few patients are responsible for the bulk of total health care expenditure, which is consistent with the findings of previous research, and that high-cost medical expenditures are more persistent among the Japanese working population than among the same population in the US. Duration is especially long after a person reaches middle age. The patterns of persistence among the top ten percent of beneficiaries are different from those among beneficiaries in lower percentiles. It appears that once a large medical expenditure occurs, it lasts for a long period of time. Among the non-elderly population, not only hospitalization but also long-term out-patient medical care for chronic diseases contributes to the persistence of high medical expenditures.

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